SAP Faces the Realities of A Consolidating Market and Ecosystem
In a not so surprise move to insiders, Goldman's efforts to tie up SAP and Business Objects proved fruitful as the two companies officially announced a friendly take over offer. (Press Release). In the press release, 2 key things were made clear:

• Organic strategy not enough to meet stated targets to grow the market. Despite great success with organic growth, Oracle's acquisition strategy is making a dent. CEO of SAP, Henning Kagermann's quote from the press release says it all. ""The acquisition of Business Objects is in keeping with SAP’s stated strategy to double our addressable market by 2010 as announced in 2005,” said Kagermann. “SAP will accelerate its growth in the Business User segment, while complementing the company’s successful organic growth strategy."" What kind of acquisitions will SAP make to meet this self imposed target?
• SAP evaluated Business Objects for more than just BI. After Oracle's takeover of Hyperion, SAP evaluated the impact to its overall solution centric ecosystem. Business Objects strong partner ecosystem played a key role in choosing Business Objects. It seems likely that Business Objects users may be forced onto NetWeaver in the long run.

The bottom line for end users
In general, hang tight and if you have the budget, negotiate longer maintenance contracts and buy new modules for significant discounts. In the history of post merger announcements, sales reps typically will be offering sweetheart deals to close out the quarter and status as an independent company. There are many win-win scenarios out there! If you are leaning towards SAP, find your SAP rep and put in the motion for a master agreement prior to merger for completion after the merger.

A quick analysis for end user scenarios:

• SAP users who chose BOBJ. Basically SAP just validated your strategy of going with BOBJ over BW. You'll want to see if you can avoid being tied to NetWeaver in the future as existing SAP users often find NetWeaver connection charges to be the highest cost of ownership.
• SAP users who don't have BOBJ. Here's your chance to buy BOBJ once its fully certified on NetWeaver. BOBJ built a great product, and XI on NetWeaver may prove to be quite solid and a significant improvement to BW. There is a reason why so many self-proclaimed "SAP Only" shops run BOBJ.

Key questions all users should ask:

• Will Business Objects users be forced on to NetWeaver in the long run?
• Can users ensure that they do not have to use NetWeaver?
• Will key management change and who will replace them?
• What impact will this have on post XI releases?
• Does being a "separate company" in the SAP group work like the way Tomorrow Now works?
• How will SAP continue to support non-SAP users?
• How will SAP and BOBJ address MDM?

The bottom line for vendors and BI competitors.
BI remains one of the hottest areas of growth as users struggle to get information out of existing legacy packaged apps. As we move to a full Y2K replacement cycle, smart companies begin the discussion with their BI strategy then with upgrade. Expect the following:

• BI market consolidation in full cycle. Oracle's acquisition of Hyperion signaled the beginning of market consolidation. Though glacial in speed, expect pressure to mount on the dwindling number of independent BI vendors. Cognos is the obvious next target with IBM, HP, and Oracle as potential suitors. Other vendors include IBI, Microstrategy, Actuate, and a very unlikely SAS.
• Expect a hostile counter offer. Valuations of $4.6B euros $6.8B may be less than other vendors had anticipated. Hyperion's deal at $3.3B seemed quite high and previous industry murmurings had BO and Cognos valued north of $7B. Deep pocket vendors such as IBM, Oracle, and HP could set a counter for the quite valuable BOBJ install base.
• Organic growth not enough for this market. After years of building a great organic strategy, even mighty SAP realizes that this industry requires strong acquisition skills for survival and growth of partner ecosystems. Acquisition analysis should follow white space mapping and charting of valuable competitor install bases. Each technology era and segment has had dominant acquires. Think of IBM, CA, Microsoft, Oracle, and Google. One may expect other vendors to reconsider their strategies.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved